DUROC AB INTERIM REPORT
JULY-SEPTEMBER 2021
STABLE OVERALL PERFORMANCE DESPITE CHALLENGES
The effects of lack of components, high raw materials and haulage prices, and extended lead have a effected many portfolio companies.
First quarter July-September 2021
- Net sales increased by 23 percent to MSEK 865.1 (703.6).
- Adjusted EBITDA* decreased by 1 percent to total MSEK 47.2 (47.9), corresponding to an adjusted EBITDA* margin of 5.5 percent (6.8).
- Adjusted EBIT totaled MSEK 22.5 (22.6).
- Operating profit (EBIT) totaled MSEK 22.5 (20.1).
- Cash flow from operating activities totaled MSEK 37.2 (54.4).
- Profit after tax was MSEK 14.8 (11.2).
- Adjusted earnings per share totaled SEK 0.38 (0.35).
- Earnings per share totaled SEK 0.38 (0.29).
- On September 30th, Cash and cash equivalents amounted to MSEK 60.4 (161.7) and the net debt excluding lease liability from IFRS 16 amounted to MSEK 129.7 (75.5). Unutilized credit facilities amounted to MSEK 275.
2021/2022 | 2020/2021 | 2021/2022 | 2020/2021 | |
Group (MSEK) | Q1 | Q1 | R12 SEP | JUL-JUN |
Net sales | 865.1 | 703.6 | 3,416.0 | 3,254.5 |
EBITDA | 47.2 | 45.4 | 191.8 | 189.9 |
Adjusted EBITDA* | 47.2 | 47.9 | 223.5 | 224.2 |
Adjusted EBITDA*-margin, % | 5.5 | 6.8 | 6.5 | 6.9 |
Operating profit/loss (EBIT) | 22.5 | 20.1 | 91.1 | 88.6 |
Adjusted EBIT* | 22.5 | 22.6 | 125.8 | 125.8 |
Profit/loss after tax | 14.8 | 11.2 | 59.0 | 55.4 |
Profit per share, SEK | 0.38 | 0.29 | 1.51 | 1.42 |
Adjusted profit per share, SEK* | 0.38 | 0.35 | 2.40 | 2.37 |
Cashflow from operating activities | 37.2 | 54.4 | 53.1 | 70.6 |
Net debt excl. lease liability from IFRS 16 | 129.7 | 75.5 | 129.7 | 139.9 |
Net debt incl. lease liability from IFRS 16 | 267.8 | 218.7 | 267.8 | 283.3 |
Net debt/Equity ratio, % | 24 | 23 | 24 | 26 |
*Adjusted for items affecting comparability. A reconciliation of amounts can be found on page 17
Duroc acquires, develops and manages companies with a focus on trade and industry. Using their profound knowledge of technology and markets, the Group's companies aim to achieve leading positions in their respective industries. As the owner, Duroc actively contributes to their development. Duroc is listed on Nasdaq Stockholm (short name: DURC). www.duroc.se
D U RO C I N T E R IM R E P O R T Q 1 2 02 1 /2 02 2 | 2 ( 1 9 ) |
CEO'S COMMENT.
The first quarter can be summarized by an increase in sales and earnings in line with last year. Disruptions in the logistics chain and the lack of materials led to price increases. Performance improvements were noted in several portfolio companies. At the same time, parts of the group experienced lower demand related to the prevailing semiconductor shortage, and this had a negative effect. Diversification in the portfolio is a strength and makes Duroc less vulnerable overall. My evaluation that we, in the medium to long term horizon, will be able to deliver a significantly higher result than noted in 2020/2021, still stands.
First quarter July-September 2021
In all, Duroc delivered first quarter earnings on par with the previous year, despite the negative impact from Cotting Group and Drake Extrusion, mainly related to lower volumes in Automotive. Sales increased by 23 percent to MSEK 865.1
(703.6). Increased costs related to delivery disruptions and materials shortages around the world impacted earnings. Adjusted EBIT totaled MSEK 22.5 (22.6).
The quarter, which was affected by the vacation season, began cautiously before finishing strongly, as anticipated. IFG, Cresco, DMT Group and Duroc Rail are the companies that performed best, while Cotting Group lowered the result significantly. Seen as a whole, Duroc's various holdings represent a sound spread of risks and is one of its strengths.
The portfolio companies operate in different segments and markets, and over time this ensures stability and less susceptibility to disruption. The mix of holdings combined with Duroc's conservative financial approach leads to lower risk without limiting the potential of the business.
The component shortage, especially in the automotive industry, grew unexpectedly worse during the quarter, which impacted Cotting Group in particular, but also IFG and Drake Extrusion to a certain degree. The Group's exposure to the automotive industry as a whole accounts for around 20 percent of sales. Increased haulage and raw materials prices affected various portfolio companies to different degrees.
IFG, which represents 36 percent of the Group, doubled its earnings in comparison with the previous year. Efforts involved in the transition toward more niche-oriented products continue according to plan, and the effect of reduced costs from the shutdown of one of the facilities in England will become apparent as the next quarter progresses.
Like many other industries in the USA, Drake Extrusion has been struggling to find labor and has also had to deal with high raw materials prices. While the demand for yarns continued to be strong, the shortage of labor had a negative impact on delivery capacity, resulting in negative earnings for the quarter.
Cotting Group's French unit was severely negatively affected due to the semi-conductor shortage prevailing in the wake of the pandemic and has significantly lower volumes than usual. Cresco performed well during the quarter with good order intake but is up against a strong year-over-year quarter.
DMT Group, Duroc Rail and the Small Company Portfolio all had improved earnings. The demand for machine tools remained
strong during the quarter and the order level at DMT Group is at a record high.
Future prospects
Materials shortages, disruptions in logistics chains and subsequent price rises were all greater than anticipated during the quarter. It is clear that the situation will not return to normal anytime soon. This will impact the development of earnings moving forward, but it is difficult to predict for how long and to what extent. In general, demand is anticipated to remain the same. Most likely, the portfolio companies will develop to varying degrees depending on the industry in which they operate, i.e. follow the same pattern as the first quarter. Despite the situation in the world at large, I'm comfortable with the plans the portfolio companies currently have. Having said this, I must point out that the current disruptions may mean it takes longer to realize the plans than previously estimated. I continue to believe that in the medium to long-term perspective Duroc has an earnings potential that far exceeds the Group's current performance.
John Häger
CEO
D U RO C I N T E R IM R E P O R T Q 1 2 02 1 /2 02 2 | 3 ( 1 9 ) |
DEVELOPMENTS IN DUROC PORTFOLIO COMPANIES
Duroc's portfolio companies consist of International Fibres Group (IFG), Drake Extrusion, Cresco, Cotting Group, Duroc Machine Tool Group (DMT Group), Duroc Rail and the Smaller Company Portfolio, which comprises Universal Power Nordic (UPN), Herber and Duroc Laser Coating (DLC). Set forth below are each individual portfolio company's share of net sales and adjusted EBIT for the past 12-month period, October 2020
- September 2021. Read more about developments company by company on pages 4-7 and in Duroc's segment report on page 16.
SHARE OF NET SALES (R12) | ADJUSTED EBIT PER PORTFOLIO COMPANY (R12) | ||||||||||||||||||||||||
Duroc Rail | Smaller | 60 | |||||||||||||||||||||||
4% | |||||||||||||||||||||||||
Comp Portf | 50 | ||||||||||||||||||||||||
DMT Group | 4% | 40 | |||||||||||||||||||||||
12% | IFG | 30 | |||||||||||||||||||||||
Cotting | 36% | ||||||||||||||||||||||||
20 | |||||||||||||||||||||||||
Group | |||||||||||||||||||||||||
15% | 10 | ||||||||||||||||||||||||
Cresco | Drake | 0 | |||||||||||||||||||||||
IFG | Drake Cresco | Cotting | DMT Group Duroc Rail | Smaller | |||||||||||||||||||||
9% | Extrusion | -10 | Extrusion | Group | Comp Portf | ||||||||||||||||||||
20% | -20 | ||||||||||||||||||||||||
First quarter July-September 2021
Net sales increased by 23 percent to MSEK 865.1 (703.6). Organic growth also reached 23 percent. Growth was mainly driven by IFG, Drake Extrusion and DMT Group, but the other companies also grew during the quarter, with the exception of Cotting Group. The Cotting Group continues to be affected by the semiconductor shortage in the automotive industry. IFG and Drake Extrusion also noted reduced demand in automotive. Adjusted EBITDA was in line with the previous year at MSEK 47.2 (47.9). Greatly improved earnings in IFG, DMT Group, Duroc Rail and the Small Company Portfolio were countered by lower volumes in Cotting Group and persistently rising materials prices and lower volumes at Drake Extrusion. The adjusted EBITDA margin was 5.5 percent (6.8). Adjusted EBIT totaled MSEK 22.5 (22.6) and profit after tax MSEK 14.8 (11.2).
DEVELOPMENT OF DUROC'S NET SALES
MSEK | |||||||||||
900 | |||||||||||
800 | |||||||||||
700 | |||||||||||
600 | |||||||||||
500 | |||||||||||
400 | |||||||||||
300 | |||||||||||
200 | |||||||||||
100 | |||||||||||
0 | |||||||||||
Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 |
2018/2019 | 2019/2020 | 2020/2021 | 2021/2022 |
DEVELOPMENT OF DUROC'S OPERATING PROFIT (EBIT)
MSEK | |||||||||||
100 | |||||||||||
90 | |||||||||||
80 | |||||||||||
70 | |||||||||||
60 | |||||||||||
50 | |||||||||||
40 | |||||||||||
30 | |||||||||||
20 | |||||||||||
10 | |||||||||||
0 | |||||||||||
Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 | Q2 | Q3 | Q4 | Q1 |
2018/2019 | 2019/2020 | 2020/2021 | 2021/2022 |
Operating profit for Q1 and Q2 2019/2020 includes MSEK 65.7 and MSEK
1.2 respectively for negative goodwill from business acquisitions. Q3 2020/2021 was affected by restructuring costs totaling MSEK 35.5.
D U RO C I N T E R IM R E P O R T Q 1 2 02 1 /2 02 2 | 4 ( 1 9 ) |
International Fibres Group (IFG) is one of | Share of Duroc's sales |
Europe's leading manufacturers of | (R12) |
polypropylene-based staple fibers, an input | |
product with reinforcing, insulating, | |
separating or draining properties. The fiber is | |
used in the production of e.g. flooring, rugs, | |
furniture, filters, foodstuff packaging, car | 36% |
interiors and nonwoven fabrics, which means |
a diversified customer portfolio. IFG has production facilities in Belgium, the United Kingdom and Austria.
- The significantly stronger earnings performance reflects the transition in the product mix toward niche products. Cost savings from the shutdown of a production facility in Drighlington in the UK during the second half of the financial year also contributed to the improved performance.
- Sales volumes decreased by 14 percent. Organic growth, which increased by 33 percent, was influenced by the effects of increased raw materials prices*, and also by a greater proportion of niche products in the product mix.
- While raw material prices remain at a high level, the availability of materials has improved and prices are tentatively anticipated to fall a little during the next quarter. Pricing to customers led to sustained profitability*.
Raw materials prices at IFG have risen since the second half of the 2020/2021 financial year. Price mechanisms in customer agreements mean that sales increase as raw material prices rise and decrease as prices fall. Because raw material prices affect both the sales price and raw material costs, gross profit remains unchanged, but with a certain lag.
2021/ | 2020/ | 2021/ | |
2022 | 2021 | 2022 | |
Amounts in MSEK | Q1 | Q1 | R12 SEP |
Net Sales | 338.7 | 255.3 | 1,239.2 |
Growth, Net Sales % | 32.6 | -21.0 | 24.0 |
Organic growth % | 33.0 | -18.2 | 27.9 |
EBITDA | 21.5 | 12.5 | 52.5 |
EBITDA margin % | 6.4 | 4.9 | 4.2 |
Adjusted EBITDA | 21.5 | 15.0 | 75.7 |
Adjusted EBITDA-margin, % | 6.4 | 5.9 | 6.1 |
EBIT | 15.2 | 5.0 | 23.8 |
EBIT margin % | 4.5 | 1.9 | 1.9 |
Net Debt/Net Cash (-) | 75.2 | 35.5 | 75.2 |
of which from leasing IFRS 16 | 65.5 | 73.8 | 65.5 |
Capital employed | 411.0 | 371.4 | 411.0 |
ROCE % | 6.3 | -1.2 | 6.3 |
Adjusted ROCE % | 12.9 | 1.3 | 12.9 |
Drake Extrusion is North America's leading producer of polypropylene-based colored filament yarn and staple fiber. Filament yarn is used mostly by customers who produce fabrics for the furniture industry. Staple fiber is used for production in a variety of areas including flooring, rugs, furniture, technical filters, car interiors and nonwoven fabrics. The business is located in Virginia, USA.
Share of Duroc's sales (R12)
20%
- Reduced demand for staple fibers from the automotive industry affected the quarter's sales and earnings negatively. As anticipated, demand in the yarn business was strong. However, sales volumes were held back by challenges in finding sufficient labor, which is a widespread problem in industry in the USA.
- Sales volumes decreased by 10 percent. Organic growth of 31 percent is attributable to higher prices introduced due to increased raw material costs.
- The shortage of raw materials and the associated price rises have lingered longer than expected, and they increased a little further during the first quarter. Prices to customers are adjusted upwards on a continual basis, but with a certain lag.
- EBITDA totaled MSEK 7.8 (18.3), influenced by both sales volumes and higher raw materials prices.
2021/ | 2020/ | 2021/ | |
2022 | 2021 | 2022 | |
Amounts in MSEK | Q1 | Q1 | R12 SEP |
Net Sales | 190.9 | 144.0 | 669.2 |
Growth, Net Sales % | 32.6 | -9.9 | 26.8 |
Organic growth % | 30.6 | -2.5 | 34.5 |
EBITDA | 7.8 | 18.3 | 34.2 |
EBITDA margin % | 4.1 | 12.7 | 5.1 |
EBIT | 1.2 | 11.7 | 9.8 |
EBIT margin % | 0.6 | 8.1 | 1.5 |
Net Debt/Net Cash (-) | 35.5 | -13.0 | 35.5 |
of which from leasing IFRS 16 | 12.3 | 13.7 | 12.3 |
Capital employed | 295.7 | 242.6 | 295.7 |
ROCE % | 3.8 | 17.9 | 3.8 |
D U RO C I N T E R IM R E P O R T Q 1 2 02 1 /2 02 2 | 5 ( 1 9 ) |
Cresco develops, produces and sells textile- | Share of Duroc's sales |
based solutions for the professional | (R12) |
cultivation of crops and is one of the leading | |
players on the global market. The products | |
contribute to favorable environments in | |
greenhouses, mushroom farms and | |
composting installations. The most important | 9% |
product is a climate screen for greenhouses | |
that controls the cultivation climate, | |
contributing to a more efficient process with | |
lower energy consumption. Cresco's | |
production facility is in Belgium. |
- Cresco witnessed strong demand for its products. The somewhat lower EBITDA margin in the first quarter is the result of investments in growth such as increased sales capacity and sales activities.
- Order levels at the end of the period totaled MEUR 13.6, a reduction of 4 percent in relation to the previous period's very high level.
- Cresco is well positioned to continue growing the business in a favorable market. Geographical expansion and active development efforts to complement the product offering is increasing growth capacity.
2021/ | 2020/ | 2021/ | |
2022 | 2021 | 2022 | |
Amounts in MSEK | Q1 | Q1 | R12 SEP |
Net Sales | 68.9 | 67.9 | 297.8 |
Growth, Net Sales % | 1.5 | -1.3 | 15.6 |
Organic growth % | 3.2 | 1.5 | 19.6 |
EBITDA | 8.9 | 10.5 | 45.2 |
EBITDA margin % | 12.9 | 15.4 | 15.2 |
EBIT | 7.5 | 9.2 | 40.1 |
EBIT margin % | 10.9 | 13.6 | 13.5 |
Net Debt/Net Cash (-) | 21.7 | 44.9 | 21.7 |
of which from leasing IFRS 16 | 5.6 | 5.3 | 5.6 |
Capital employed | 175.1 | 179.0 | 175.1 |
ROCE % | 3.8 | 17.9 | 3.8 |
Cotting Group has been established in the international coated textiles market for more than 60 years. Its products consist of PVC and PU coated fabrics that are used in a variety of areas, including the fashion industry, protective clothing, hospital beds, car interiors, dental chairs, furniture and wall coverings. Cotting has production facilities in France and Belgium.
Share of Duroc's sales (R12)
15%
- Net sales in Cotting Group continued to be depressed by low volumes in the French operation. The semiconductor shortage in the automotive industry led to sales volumes of around half the usual level for this customer group
- High raw materials prices also affected EBITDA negatively.
- The Belgian operation, which corresponds to around 30 percent of sales, is not as exposed to the automotive industry, and the operation continued with unchanged volumes.
- With a presence in more geographical markets along with upcoming machine park upgrades, the Cotting Group will be in a better position when demand returns.
2021/ | 2020/ | 2021/ | |
2022 | 2021 | 2022 | |
Amounts in MSEK | Q1 | Q1 | R12 SEP |
Net Sales | 96.8 | 118.0 | 514.4 |
Growth, Net Sales % | -18.0 | -16.2 | -7.9 |
Organic growth % | -16.6 | -13.4 | -4.1 |
EBITDA | -6.3 | -1.5 | -0.3 |
EBITDA margin % | -6.5 | -1.2 | -0.1 |
Adjusted EBITDA | -6.3 | -1.5 | 5.8 |
Adjusted EBITDA-margin, % | -6.5 | -1.2 | 1.1 |
EBIT | -11.1 | -5.7 | -17.9 |
EBIT margin % | -11.5 | -4.8 | -3.5 |
Net Debt/Net Cash (-) | 60.7 | 6.7 | 60.7 |
of which from leasing IFRS 16 | 4.4 | 7.2 | 4.4 |
Capital employed | 309.5 | 290.7 | 309.5 |
ROCE % | -6.1 | 0.5 | -6.1 |
Adjusted ROCE % | -4.0 | 2.5 | -4.0 |
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Duroc AB published this content on 09 November 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 November 2021 09:12:03 UTC.
